Blixseth v. Marc S. Kirschner, Trustee of the Yellowstone Club Liquidating Trust

Filing 54

MEMORANDUM AND ORDER. Blixseth's request to vacate the judgment of 12/5/12 is DENIED. The December 5, 2012 judgment of the Bankruptcy Court is AFFIRMED. Signed by Judge Sam E Haddon on 4/7/2014. (ELL, )

FILED
APR 07 201.
Cieri<.

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District Court

Disllict Of Montana
Helena

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION

In re:

YELLOWSTONE MOUNTAIN
CLUB, LLC, et al.,
Debtors.

No. CV-12-83-BU-SEH
TIMOTHY L. BLIXSETH,
Appellant/Cross-Appellee,
Adversary No. 09-00014
Bankruptcy No. 08-61S70-11-RBK

vs.

BRIAN A. GLASSER, AS
SUCCESSOR TRUSTEE OF THE
YELLOWSTONE CLUB
LIQUIDATING TRUST,

MEMORANDUM
AND ORDER

Appellee/Cross-Appellant.
INTRODUCTION
This matter is before the Court on cross appeals taken from the bankruptcy

court's Second Amended Judgment of December 5, 2012, awarding judgment in
favor of Marc S. Kirschner, Trustee ofthe Yellowstone Club Liquidating Trust
("YCL T"), against Timothy L. Blixseth ("Blixseth") of $40,992,210.81. 1
Blixseth asserts the judgment against him should be vacated. YCLT claims
judgment of $286,379,053.00 should have been awarded. 2
The appeal was set for hearing and oral argument by Order of March 25,
2014. 3 Appellant's counsel did not appear. The Court convened the hearing at
10: 13 a.m. after confirming that counsel had not appeared at the courthouse or
checked in for the hearing and had provided no explanation for the
nonappearance.
Appellant, by non-appearance, has forfeited hearing and argument on the
appeal. The matter is submitted for decision on the briefs and filings of record.

BACKGROUND
The ongoing saga of the Yellowstone Club bankruptcy starting in 2008 is

I See Memorandum of Decision, Blixseth v. Kirschner, AP 09-00014, 2012 WL 6043282
(Bankr. D. Mont. Dec. 5, 2012)("December 5, 2012, MOD"); (Doc. 1-4.)

2 This appeal was stayed under II U.S.C. § 362 by notice of automatic stay filed January
10,2013. (Doc. 4.); See In re Blixseth, 484 B.R. 360 (B.A.P. 9th Cir. 2012)(reversing the U.S.
Bankruptcy Court for the District of Nevada's dismissal ofthe bankruptcy proceedings). The
stay was lifted on September 11,2013. (Doc. 15.)

3 (Doc. 51.) Appellants present counsel of record appeared by Notice of Substitution filed
February 27, 2014. (Doc. 50.)

2

arguably one for the record books. Published decisions and opinions addressing
the multitude of issues litigated and decided within the case occupy literally
hundreds of pages of text. 4
The Ninth Circuit's recent opinion in Blixseth v. Yellowstone Mountain
Club, LLC, 742 F.3d 1215 (9th Cir. 2014), provides an excellent synopsis of
significant components of the case's history:
Blixseth and his ex-wife founded Yellowstone
Mountain Club, a ski and golf resort built on the twin
pillars ofluxury and exclusivity. A haven for the ultra­
wealthy, Yellowstone offers "Private Powder": over
2,200 acres of skiable terrain available only to club
members and their invited guests. See Yellowstone
Club, Ski, http://goo.glltfWQ5n. It was at one point the
only private ski area in the world. See In re BLX Group,
Inc., 419 B.R. 457,460 (Bankr. D. Mont. 2009). In
2005, Yellowstone borrowed $342 million. Id. at 461.
The same day, over $200 million of this money was
"disbursed by Blixseth to various personal accounts and
payoffs benefitting Blixseth and [his ex-wife]
personally." Id. Unsurprisingly, Yellowstone eventually
4 See, e.g., Credit Suisse v. Official Comm. of Unsecured Creditors, 415 RR. 769 (Bankr.
D. Mont. 2009); Blixseth v. Kirschner, 436 B.R. 598 (Bankr. D. Mont. 2010)("Allgllst 16,2010,
MOD"); Blixseth v. Yellowstone Mountain Club. IIC, CV-09-47-BU-SEH, 2010 WL 4371368
(D. Mont. 2010); In re Yellowstone Mountain Club. IIC, 460 B.R. 254 (Bankr. D. Mont. 2011);
In re Yellowstone Mountain Club, IIC, 08·61570·11,2011 WL 3813161 (Bankr. D. Mont.
2011); In re Yellowstone Mountain Club, IIC, CV·II·73·BU·SEH, 2012 WL 5838437 (D.
Mont. 2012); In re Yellowstone Mountain Club, IIC, 08-61570-11,2012 WL 2921012 (Bankr.
D. Mont. 2012); In re Yellowstone Mountain Club, IIC, 08·61570-11,2013 WL 1099155
(Bankr. D. Mont. 2013); In re Yellowstone Mountain Club, IIC, 08·61570·11,2013 WL
6536805 (Bankr. D. Mont. 2013); Blixseth v. Yellowstone Mountain Club, IIC, 742 FJd 1215
(9th Cir. 2014); In re Yellowstone Mountain Club, IIC, 08-61570-11, 2014 WL 1016007
(Bankr. D. Mont. 2014).

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filed for bankruptcy.
Blixseth objected to the proposed bankruptcy
settlement plan (the Plan), arguing that his ex-wife and
others were the cause of Yellowstone's financial
problems. See In re Yellowstone Mountain Club, LLC,
436 B.R. 598, 641-44 (Bankr. D. Mont. 2010), amended
in part by In re Yellowstone Mountain Club, LLC, No.
08-61570-11,2010 WL 3504210 (Bankr. D. Mont. Sept.
7,2010). The bankruptcy court disagreed. It found that
Blixseth had misappropriated Yellowstone's cash and
property for his personal use and that his fraudulent
intent in doing so "could not be more clear." Id. at 657­
64. The bankruptcy court entered a $40 million
judgment against Blixseth-the amount the court
determined was necessary to payoff certain classes of
creditors. Id. at 679. The district court reversed on
narrow grounds, directing the bankruptcy court to give
proper notice to the affected parties and further refine an
exculpation clause in the Plan. See generally Blixseth v.
Yellowstone Mountain Club, LLC, No. CV 09-47, 2010
WL 4371368 (D. Mont. Nov. 2, 2010).

Blaseth, 742 F.3d at 1218 (footnote omitted).
The judgment against Blixseth was first entered on August 16, 2010. 3 It
was amended on September 7, 2010. 4 After further proceedings, including efforts

J

See August 16,2010, MOD; (Doc. 17-7.)

4 The September 7, 2010, amendment followed further briefing. See Memorandum of
Decision, Blixseth v. Kirschner, AP 09-00014, 2010 WL 3504210 (Bankr. D. Mont. 2010 Sept.
7, 2010)("September 7,2010, MOD"); (Doc. 17-8.)

4

to disqualify the presiding Bankruptcy Judge/ to reopen discovery, and to amend
the judgment, the judgment was again amended on December 5, 2012. 6
ISSUES

Blixseth's brief asserts, with startling disarray and confusion, in excess of
forty claims of error, wrongdoing, or inappropriate conduct by the bankruptcy
court and others as bases for challenging the judgment. 7 Many arguments
reference matters that are beyond the record or that are distortions of the record.
Others attempt to reassert or to inject issues into this case already finally decided
in other litigation related to the bankruptcy. Such efforts at diversion,
unfortunately, have been common to Blixseth's tactics in matters throughout the
pendency of bankruptcy.
The substantive issues raised by the appeal are, in point of fact, two in
number:
1.

5

Did the bankruptcy court have jurisdiction to enter the final judgment

The disqualification question was put to rest by the Ninth Cireuit in Blixseth, 742 F 3d

at 1222.
6 This appealed judgment it is to "be read in conjunction with the now vacated Partial &
Interim Order entered May 13,2009, ... and the Memoranda of Decision entered June 11,2009,
...; August 16,2010, ...; September 7, 2010, ...; and March 12,2012." December 5, 2012,
MOD at "2; (Doc. 1-4 at 3-4.)

7

If subparts of arguments are included, the number of claims of error rises to over fifty.

5

of$40,992,210.81 against Blixseth?
2.

Is the judgment supported by the record?

The answer to each issue is "yes."

JURISDICTION

This court has appellate jurisdiction to review final orders of the bankruptcy
court under 28 U.S.c. § IS8(a).8 The appeals are timely.
DISCUSSION

Jurisdiction/Final Order
A bankruptcy court plainly has authority to enter final orders, including
judgments, in matters within its jurisdiction. 9 Blixseth became a party to this
adversary proceeding by intervention upon his request. 10 He agreed to the
bankruptcy court's jurisdiction and fully participated in the proceedings through
entry of final judgment. I I He has no basis to now assert lack ofjurisdiction. Any

Final order status of the Second Amended Judgment of December 5, 2012, is addressed
under JurisdictionlFinal Order below.
g

District Courts may refer "any or all cases under title II and any or all proceedings
arising under title 11 ... to the bankruptcy judges for the district." 28 U.S.C. § 157(a) (2012).
Bankruptcy judges are permitted to enter "appropriate orders and judgments." 28 U.S.C. §
157(b)(1).
9

See Complaint in Intervention, Blixseth v. Kirschner, AP 09-00014-BU-RBK, Doc. 28­
I (Bankr. D. Mont. Mar. 16,2009); (Doc. 38-1 at 18.)
lO

The Bankruptcy court determined "Blixseth appeared quite content litigating matters"
to the Bankruptcy court and "Blixseth's actions up to August 16, 20 I 0, constitute[ d] implied or
11

6

claim of lack ofjurisdiction purportedly grounded in Stern v. Marshall, 131 S. Ct.
2594 (2011), is at odds with the clear doctrine of implied consent to jurisdiction
recognized and approved in Stern and subsequently reemphasized by the Ninth
Circuit. 12
Record Support of Judgment
Upon review, a bankruptcy court's "[f]indings of fact, whether based on oral
or documentary evidence, shall not be set aside unless clearly erroneous, and due
regard shall be given to the opportunity of the bankruptcy court to judge the
credibility of the witnesses." 13 A "finding offact is clearly erroneous [only] if it
is "(1) 'illogical,' (2) 'implausible,' or (3) without 'support in inferences that may
be drawn from the facts in the record.",14
Opinions and orders from the bankruptcy court in the adversary proceeding

infonnal consent to this Court's authority to render a final decision under Stern v. Marshall and
Bellingham." December 5, 2012, MOD, at *7-8; (Doc. 1-4 at 13.)
12 '" [T]he

consequences of a litigant sandbagging the court -- remaining silent about his
objection and belatedly raising the error only if the case does not conclude in his favor - can be .
. . severe.' Having lost before the bankruptcy court,[a party] CamIot assert a right it never thought
to pursue when it still believed it might win." In re Bellingham Ins. Agency, Inc., 702 F.3d 553,
570 (9th Cir. 2012) cert. granted, 133 S. Ct. 2880 (2013)(citation omitted)(citing Stern, 131 S.
Ct. at 2609 (2011 )(intemal quotation marks, alterations, and citations omitted).
"Fed. R. Bankr. P. 8013.

'4 Seller Agency Council, Inc. v. Kennedy Center for Real Estate Educ., Inc., 621 F.3d
981, 986 (9th Cif. 2010)(citing United States v. Hinkson, 585 F 3d 1247, 1262 (9th Cif.
2009)(citation omitted).
7

alone, directed to the claims giving rise to the judgment on appeal, exceed 232
pages. 15 Those writings, when considered and read together from the standpoint of
totality of circumstances, disclose a record, compiled in meticulous and careful
detail, of relevant case background and history, findings of fact, legal analysis and
decision-making process.
Judge Kirscher's careful compilation and reports of the myriad of events
surrounding the Yellowstone Club's bankruptcy are not and could not be subject
to meaningful challenge. Factual determinations cannot be said to be clearly
erroneous. Findings grounded in whole or in part in credibility of witnesses were
certainly justified. Tactics of some witnesses and some counsel, which were at
best ill advised, and, more realistically, deliberately misleading, plainly added to
the court's tasks and frustrations in addressing the issues before it.
As noted above, many of the arguments now advanced in this appeal by
Blixseth plainly cannot withstand scrutiny on the facts or under established
principles oflaw. For example, the bankruptcy court did not inappropriately rely

l5 See, e.g., Blixseth v, Kirschner, AP 09-00014, (Bankr. D. Mont.), Partial & Interim
Order, May 13,2009, Doc. 289; Memorandum of Decision, June 11,2009, Doc. 292; August 16,
2010, MOD, Doc. 575; September 7,2010, MOD, Doc. 580; Order, December 13,2011, Doc.
682; Memorandum of Decision, March 12,2012, Doc. 701; December 5, 2012, MOD, Doc. 712.

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on evidence outside the record. 16 Blixseth's breach of fiduciary duties and his
inappropriate and fraudulent manipulations of corporations he controlled to his
personal benefit were amply demonstrated. 17 Fraudulent transfers were
appropriately set aside. ls The California divorce settlement between Blixseth and
his wife did not bar the Trustee's c1aims. 19 The Trustee's claims were not barred
by statutes oflimitations. 20 No useful purpose would be served by further
individualized review and discussion of each of the plethora of meritless
arguments in the briefs, many ofwhich mirror a continuation of delay and
diversion tactics employed earlier in the litigation.
CONCLUSION
The bankruptcy court had jurisdiction to hear and decide the case. Blixseth
was represented at every stage of the proceedings by an array of counsel.ll The

16

See, e.g., December 5, 2012, MOD at *8-9; (Doc. 1-4 at IS.)

17

See August 16,2010, MOD at 668-71; (Doc. 17-7 at 117-21.)

l&

See August 16,2010, MOD at 655-68; (Doc. 17-7 at 93-117.)

"As such, this Court concludes that nothing that occurred in the Blixseth divorce

proceeding is binding upon the Debtors." August 16, 2010, MOD at 662; (Doc. 17-7 at 105.)
19

20

See August 16, 2010, MOD at 649-52; (Doc. 17-7 at 82-87.)

21 See, e.g., Thomas A. Banducci, Esq.; Benjamin A. Schwartzman, Esq.; Wade L.
Woodard, Esq.; Brent Bastian, Esq.; Jennifer Schrack Dempsey, Esq.; Michael J. Flynn, Esq.;
Philip H. Stillman, Esq.; Joseph M. Grant, Esq.; Joel E. Guthals, Esq.; and Patrick T. Fox, Esq.

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bankruptcy court, notwithstanding an unwarranted attack by BJixseth upon the
Judge personally, accorded him error-free due process.
ORDER

Blixseth's request to vacate the judgment of December 5, 2012, is DENIED.
The December 5, 20 12, j~ent of the Bankruptcy Court is AFFIRMED.
DATED this

£

day of April, 2014.

United States District Judge

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